Should the Federal rules of bankruptcy procedure be amended to expressly authorize United States district and bankruptcy courts to appoint a special master in an appropriate...

Clift, R Spencer III

I. INTRODUCTION

This article attempts to justify the utilization and appointment of special masters in appropriate and rare bankruptcy cases and proceedings by explaining the unique case management role special masters contribute in exceptional circumstances.1 Specifically, this article calls for an amendment to the Federal Rules of Bankruptcy Procedure to provide expressly that United States district and bankruptcy courts may appoint a special master in a highly complex and rare bankruptcy case or proceeding. Notwithstanding the appropriateness of the appointment of a special master, Federal Rule of Bankruptcy Procedure 9031, a procedural rule, currently prohibits the appointment of a special master by both the United States district and bankruptcy courts in any "case" under the Bankruptcy Code ("Code").

This article focuses on the distinctive need for special masters to be appointed and authorized to participate in appropriate and rare bankruptcy "cases" and "proceedings." The article does not address the overwhelmingly vast majority of cases and proceedings filed under the Code because it is not contemplated that special masters should be routinely appointed. Instead, this article is directed primarily toward highly complex, commercial, fact-intensive bankruptcy cases and proceedings warranting the unique expertise of a special master as a valuable case management tool to, inter alia, reduce costs and delays.

Concomitantly, this article respectfully suggests that the Federal Rules of Bankruptcy Procedure should be amended pursuant to the Rules Enabling Act2 to expressly authorize the appointment of a special master by United States district and bankruptcy courts in appropriate and rare bankruptcy cases and proceedings. This article also respectfully requests the current United States Judicial Conference Advisory Committee on Bankruptcy Rules to reconsider its two prior declinations and thereafter recommend and transmit to the United States Judicial Conference Standing Committee on Rules of Practice and Procedure a proposed amendment to the Federal Rules of Bankruptcy Procedure providing that United States bankruptcy and district courts have the express authority to appoint special masters in highly complex and rare bankruptcy cases and proceedings. For the reasons to be discussed hereinafter, the judicial officers (i.e., United States district and bankruptcy judges) administering the federal bankruptcy laws should have the unambiguous authority on a case-bycase and proceeding-by-proceeding basis to utilize this highly effective and valuable case management tool and exercise their inherent, equitable authority to appoint special masters where appropriate to do so.

More specifically, Part I of this article provides an historical development of the role of the special master. Part II analyzes the role and powers covering the appointment of special masters. Part III addresses whether Federal Rule of Bankruptcy Procedure 9031, which currently prohibits the appointment of special masters in any "case" under the Code, was an intended result. Part IV suggests why special masters should be authorized and appointed in appropriate and rare bankruptcy cases and proceedings. Part V addresses the earlier negative views of the 1995 Judicial Conference Advisory Committee on Bankruptcy Rules on the issue of special masters in bankruptcy cases and proceedings. Part VI addresses the reasons why the 1996 Advisory Committee on Bankruptcy Rules did not recommend the abrogation of Rule 9031. Part VII respectfully calls for the current Judicial Conference Advisory Committee on Bankruptcy Rules to reexamine and reconsider its prior position on the scope and impact of the existing procedural rule (i.e., Rule 9031) and the accompanying Advisory Committee note prohibiting the appointment of special masters in any bankruptcy case or proceeding by United States district and bankruptcy courts.

A. Historical Development of the Role of the Special Master

The British pioneered the role of the special master as a useful case management tool in chancery courts in order to more efficiently administer guardianships and probate estates.3 The first legislative authority ratifying the appointment of a special master can be traced to the British Parliament's passage of the Superior Courts Officers Act of 1837.(4)

Since the creation of our system of government, American courts have employed the services of special masters on a case-by-case basis deriving their authority from the English precedent.5 Prior to the promulgation of the Federal Rules of Civil Procedure in 1938, the appointment of special masters was expressly recognized in Equity Rules 52, 59, 62 and also as an inherent power of the court.6 Equity Rules 52 and 62, which were adopted in 1912, resemble current Federal Rules of Civil Procedure and contain the identical and important caveat that special masters are only authorized in exceptional circumstances.7

This caveat is simply that the appointment of a special master in any bankruptcy case, whether a bankruptcy case or proceeding, would be the rare "exception, not the rule," and will serve as an important and recurring underlying theme throughout this article.8 When such rare and exceptional circumstances exist, special masters, serving as valuable case management tools, can greatly contribute to the simplification and efficient advancement of speedier and less costly litigation.9

The role of the special master in non-bankruptcy civil matters is focused, inter alia, on discovery and difficult accounting issues in extremely complex cases. Other tasks include, for example, mediating between and among parties, making highly specialized reports and recommendations, evaluating scientific information, conducting and managing discovery, and guiding consensual settlement negotiations.10 Special masters enter the litigation process (1) after the parties consent to such an appointment, (2) by virtue of the inherent authority of the court, or (3) by virtue of Federal Rule of Civil Procedure 53(b).11

II. POWERS OF APPOINTMENT OF SPECIAL MASTERS

A. Inherent Authority of the Court to Appoint Special Masters

For many years, United States district judges have possessed the inherent authority to appoint special masters, especially in matters where neutral third party expertise would aid the disposition of a civil action.12 This point was manifested even before the promulgation of the Federal Rules of Civil Procedure in 1938. The inherent power of the court is noted in In re Peterson13 as follows:

Courts have (at least in the absence of legislation to the contrary) inherent power to provide themselves with appropriate instruments required for the performance of their duties. This power includes authority to appoint persons unconnected with the court ... such as special masters, auditors, examiners and commissioners... with or without the consent of the parties, to simplify and clarify issues and to make tentative findings.14

In the event a district court chooses not to exercise its inherent authority and appoint a special master, it may appoint a special master pursuant to the authority set forth in Federal Rule of Civil Procedure 53.

B. The Power of the Court to Appoint Special Masters Pursuant to Federal Rule of Civil Procedure 53

Rule 53 of the Federal Rules of Civil Procedure provides separate guidelines in non-bankruptcy civil matters, depending upon whether the district court action is a jury or non-jury case.15 Special masters are authorized in jury cases only when the issues are especially complicated.16 In non-jury cases in the district court, special masters are authorized for appointment only when, for example, the issues involve very difficult accountings, multi-variable damage computations, or other "exceptional conditions."17 Additionally, it is noted that special masters play a vital role in modern, nonbankruptcy civil litigation by implementing remedial decrees.18 Remedial decrees (e.g., court decisions ordering the expedited desegregation of public facilities) manifest the skill and talent special masters contribute in complex civil actions.19 Bankruptcy courts, like district courts adjudicating non-jury civil actions, would have to find "exceptional circumstances" in order to appoint a special master in a case or proceeding. A thorough discussion and explanation of the "exceptional circumstances" requirement is necessary.

C. The Exceptional Circumstances Requirement

The United States Supreme Court has invalidated and condemned the appointment of a special master when the circumstances and facts of the civil actions fail to merit the need for such an appointment.20 In La Buy v. Howes Leather Co., the Supreme Court held that congested dockets, complex civil actions, and lengthy trials failed to justify the appointment of a special master.21 Of course, courts should not use a special master to abdicate judicial responsibilities; exceptional circumstances must exist in an appropriate civil action.

A better understanding of the "exceptional conditions" requirement is exemplified by the following case summaries:

* Burlington Northern Railroad Co. v. Department of Revenue22 - The court failed to find exceptional circumstances to support a Rule 53 reference to a special master where the reference was "in the interest of judicial economy" and the master's reported recommendations were affirmed in a one sentence order.

* In re Agent Orange Product Liability Litigation23 - The court allowed the appointment of a special master pursuant to Rule 53 based upon the fact that the information sought in discovery was scientific, highly technical, and complex in nature.

* Caldwell Industries, Inc. v. New York Hospital-Cornell Medical Center24 - The court refused to allow for the appointment of a special master pursuant to Rule 53 where counsel for the litigants was deemed capable of explaining difficult medical and scientific materials and theories to an audience unfamiliar with the subjects.

* Mobil Oil Corp. v. Altech Industries, Inc.25 - The court found exceptional conditions existed and authorized the appointment of a special master pursuant to Rule 53 in order to supervise discovery due to conflicting factual evidence, the anticipated addition of new parties by the defendants, and the high volume of documentary evidence.

* U.S. v. Microsoft Corp.26 - The court relied on La Buy in refusing to appoint a special master pursuant to Rule 53 stating that there was no apparent need for an expert to interpret the "plain English" of a consent decree drafted by the parties and failed to see the technological complexities in this particular circumstance.27

Accordingly, the judicial definition of "exceptional circumstances" under Rule 53(b) seems to call for the appointment of a special master in complex, resource-exhausting civil actions such as mass tort cases (e.g., asbestos, agent orange, or DDT cases), massive commercial litigation, or remedial decrees rendered to formulate institutional change.28

Such complex issues also may arise in certain types of bankruptcy cases and proceedings, yet the plain text of Rule 9031 and its accompanying Advisory Committee note expressly prohibit the courts - both United States district and bankruptcy - from appointing a special master under any circumstance. Specifically, Rule 9031 and its accompanying Advisory Committee note, read collectively, provide that Rule 53 of the Federal Rules of Civil Procedure does not apply in cases and proceedings under the Code.29

Interestingly, Federal Rule of Civil Procedure 81 (a)(1) states the applicability of the Federal Rules of Civil Procedure and provides, in relevant part here, that the Rules of Civil Procedure do not apply to "proceedings" in bankruptcy. There is no parallel Federal Rule of Bankruptcy Procedure 7081 to Federal Rule of Civil Procedure 81(a)(1). However, Federal Rule of Civil Procedure 81(a)(1) is not applicable to bankruptcy "cases" under the Code. Although Rule 81(a)(1) carefully limits its restrictive language on the appointment of special masters to bankruptcy "proceedings," Federal Rule of Bankruptcy Procedure 9031 extends the prohibition to bankruptcy "cases," even though there is an absence of both statutory and civil rule authority for this restrictive prohibition. The Advisory Committee note accompanying Rule 9031 further extends the prohibition to bankruptcy "proceedings."

Accordingly, Federal Rule of Civil Procedure 53 regarding the appointment of special masters does not apply in a bankruptcy "proceeding" under the Code, even if the district court withdraws the reference under 28 U.S.C. sec 157(d) and desires to appoint a special master while exercising original bankruptcy jurisdiction (or the district court withdraws the reference for the special and limited purpose of making such an appointment on behalf of the bankruptcy court as a valuable case management tool and immediately thereafter "re-refers" the proceeding to the bankruptcy court).

III. FEDERAL RULE OF BANKRUPTCY PROCEDURE 9031: AN INTENDED RESULT OR A MISINTERPRETATION OF FORMER BANKRUPTCY RULE 513?

A. Former Bankruptcy Rule 513: The Origin ofFederal Rule of Bankruptcy Procedure 9031

Prior to 1983, former Bankruptcy Rule 513 governed and provided the authority regarding whether a special master could be appointed in a bankruptcy case.30 Pursuant to former Bankruptcy Rule 513, United States district judges had the authority to appoint special masters in bankruptcy cases based on the fact that Rule 53 of the Federal Rules of Civil Procedure applied in bankruptcy cases.31 It appears that former Bankruptcy Rule 513 did "not contemplate that a referee [or bankruptcy judge]32 would ever make a special master reference or appointment."33

The impact of the inhibiting words found in former Bankruptcy Rule 513, which apparently limited the powers of the bankruptcy referee (known today as "United States bankruptcy judges"),34 should not be overemphasized here. Scholarly commentary on the effect of former Bankruptcy Rule 513 curtailed what seemed to be a manifest procedural restriction upon a referee or bankruptcy judge's appointment of a special master. The commentary indicates this point by stating as follows: "As there is no specifically conferred power on the bankruptcy referee to make special master references it follows that Bankruptcy Rule 513 confers no added power."35 Although the utilized language fails to equate to a flat restriction upon the appointment of a special master, the commentary on the rule seemingly fails to offer a clear answer regarding the authority for the appointment of a special master by a referee in bankruptcy or by a bankruptcy judge.

If former Bankruptcy Rule 513 failed to provide a definitive answer regarding the validity of a special master appointment by a referee or bankruptcy judge, other developments may have justified the appointment of special masters. The enactment ofthe 1978 Code, the revised rules of bankruptcy procedure, and distinct statutory provisions, such as section 105 of the Code, offer grounds for special master appointments.

The issue regarding the appointment of a special master under the bankruptcy court's inherent, equitable powers, codified in section 105 of the 1978 Code, first arose in In re White Motor Credit Corp.36 Although the court, on appeal, ultimately nullified the special master appointment in In re White, the United States district court, acting as an appellate court, recognized the bankruptcy court's authority to appoint a special master when it stated that "[t]his [the nullification of the special master appointment] is not to suggest that a bankruptcy court has no power to appoint a Special Master."37 On appeal, the district court stated that claims in bankruptcy could be referred to a special master with the direction that Rule 53 should be followed.38

On various other occasions, the appointment of a special master has been efficiently utilized by district courts as a highly effective and valuable case management tool, notwithstanding some constitutional debate.39 In any event, before the national Bankruptcy Rules of Procedure were amended in 1983, United States district courts clearly had the authority pursuant to former Bankruptcy Rule 513 to appoint special masters in bankruptcy cases.40

On August 1, 1983, the Federal Rules of Bankruptcy Procedure became effective pursuant to the Rules Enabling Act under 28 U.S.C. secs 2071-2077. At this point, the authority under the rules to appoint a special master in bankruptcy "cases" under the Code, even by the district court, was eliminated.41 As noted earlier, the Advisory Committee note accompanying Federal Rule of Bankruptcy Procedure 9031 states that this appointive prohibition also extends to bankruptcy "proceedings" under the Code as well as "cases."42 Yet, there is no statutory authority nor a Federal Rule of Bankruptcy Procedure 7081 (i.e., no procedural rule mirroring Federal Rule of Civil Procedure 81 (a)(1)).

B. Federal Rule of Bankruptcy Procedure 9031

The promulgation of Federal Rule of Bankruptcy Procedure 9031 and its accompanying Advisory Committee note created and marked a significant alteration regarding the appointment of special masters in bankruptcy cases and proceedings under the Code and the role of Federal Rule of Civil Procedure 53 in such cases and proceedings. Specifically, Federal Rule of Bankruptcy Procedure 9031 is entitled "Masters Not Authorized" and provides that "Rule 53 F.R. Civ. P. does not apply in cases under the Code."43

The accompanying Advisory Committee note to Rule 9031 emphasizes the intent of the drafters of the rule by stating that "[t]his rule precludes the appointment of masters in cases and proceedings under the Code."44 This restriction, coupled with the phrase "in cases under the Code," inhibits both bankruptcy and district judges from appointing special masters even in appropriate and rare cases or proceedings under the Code.45 Therefore, the restrictive scope of Federal Rule of Bankruptcy Procedure 9031 is ostensibly very broad. Interestingly, however, "Rule 9031 by its own terms would not preclude the appointment of a special master in a civil proceeding which involves the debtor but does not arise under the Code."46 Thus, it is the Advisory Committee note, not Rule 9031, that specifically restricts the appointment of a special master in a "proceeding" under the Code.

C The Scope of Federal Rule of Bankruptcy Procedure 9031

1. Federal Rules of Bankruptcy Procedure 903 1, Federal Rule of Civil Procedure 81(a)(1), Federal Rule of Bankruptcy Procedure 1001, and 28 U.S.C. sec 157(a) and (d).

United States district judges may from time to time adjudicate complex claims and related litigation under the Code. Unfortunately, it appears that district judges, like bankruptcy judges, believe that they may not appoint a special master in a bankruptcy case or proceeding because Rule 9031 and its accompanying Advisory Committee note, when read collectively, prohibit it. After considering the language in the rule and Advisory Committee note, the rule and note preclude both district and bankruptcy courts from appointing special masters based upon the fact that the utilized language applies to both "cases and proceedings under the Code."47

Due to the comprehensive scope of the Federal Rules of Bankruptcy Procedure, as set forth in Rules 1001 and 9031, district judges, as stated earlier, also are precluded from appointing a special master in a bankruptcy "case" under the Code, even if the reference is withdrawn under 28 U.S.C. sec 157(d) and the district judge exercises original bankruptcy jurisdiction.48 In contrast, however, Federal Rule of Civil Procedure 81 (a)(1) only applies to "proceedings" in bankruptcy -- not to bankruptcy "cases."49 Does this mean or suggest that a district judge may appoint a special master in a bankruptcy case, notwithstanding Federal Rule of Bankruptcy Procedure 9031? Are the Federal Rules of Bankruptcy Procedure (i.e., Rule 9031) and the Federal Rules of Civil Procedure (i.e., Rule 81(a)(1)) in conflict on this point? If a rules conflict exists, was the restriction regarding the appointment of a special master in Federal Rule of Bankruptcy Procedure 9031 an intended result? Perhaps clarification is required.

The clear distinction between a bankruptcy "case" and "proceeding" under the Code must be thoroughly analyzed and is worth further clarification considering its great significance under the Code, its accompanying relevant Title 28 provisions, and the Federal Rules of Bankruptcy Procedure.50 First, the bankruptcy "case" is described as a term of art which refers to the entire case or the "whole ball of wax" that is created upon the filing of the bankruptcy "petition" under sec 101(42) of the Code.51 Second, "proceedings" are specific "subactions" within a bankruptcy "case" and are commenced by the filing of, for example, a complaint, motion, notice, an objection, or an application.52

The Congress officially recognized the statutory distinction between a "case" and "proceeding" when it enacted the former bankruptcy rules approved by the Supreme Court and Congress in 1973.(53) Although these distinctively different terms are not statutorily defined under the 1978 Code, nothing indicates that Congress intended a different meaning for these terms than the meanings historically used under the 1898 Act.54 Congress has frequently drawn distinctions between bankruptcy cases and the civil proceedings arising under, arising in, or related to such cases since the enactment ofthe 1978 Code.55 Thus, the terms bankruptcy "case" and "proceeding" must be considered according to their respective differences when analyzing the impact of the procedural rules promulgated under the Rules Enabling Act.56

When analyzing the distinctive differences of the terms "case" and "proceeding," one also should consider the intended results of Federal Rule of Civil Procedure 81(a)(1) and Federal Rule of Bankruptcy Procedure 9031. As noted earlier, these two rules and the Advisory Committee Note accompanying Rule 9031 simply do not accord. These inconsistencies prompt the following questions: What did the drafters actually intend? What is best for the bankruptcy system and its users?

In summary, Rule 9031 and its accompanying Advisory Committee Note collectively act to restrict and otherwise preclude both United States district and bankruptcy judges from appointing special masters in an appropriate, complex, and rare case or proceeding under the Code regardless of the need for such an appointment. This unfortunate restriction exists even though there is no express statutory prohibition and only a partial prohibition on "proceedings" under the Federal Rules of Civil Procedure.

2. Federal Rules of Bankruptcy Procedure 9031, 9001(4), and 9002(4)

The restriction found in Rule 9031 regarding the appointment of special masters is substantiated by the text of Rules 9001(4) and 9002(4) ofthe Federal Rules of Bankruptcy Procedure. Rule 9001(4), entitled "General Definitions," states that "'Court' or 'judge' means the judicial officer before whom a case or proceeding is pending."57 Moreover, Federal Rule of Bankruptcy Procedure 9002 explains the meanings of words in the Federal Rules of Civil Procedure applicable to cases under the Code.

Rule 9002(4) states that a "' [d]istrict court,' 'trial court,' 'court,' `district judge,' or 'judge' means bankruptcy judge if the case or proceeding is pending before a bankruptcy judge."58 The broad scope of these terms and definitions makes Rule 9031 applicable to both bankruptcy and district court judges. Therefore, the rules, read collectively and accurately, restrict and otherwise preclude both district and bankruptcy "judges" from appointing a special master under Federal Rule of Civil Procedure 53 in cases under the Code.59

3. Former Bankruptcy Rule 513 Compared to Federal Rule of Bankruptcy Procedure 9031

The rules and definitions discussed above are significant because the terms, especially as they applied to former Bankruptcy Rule 513, were not identically defined. Under former Bankruptcy Rule 513, the word "judge" meant United States district judge and not "bankruptcy judge."60 The significance of the possible ambiguity is diminished when one considers that district judges, after the reference to the bankruptcy referee (or bankruptcy judge), ceased to officially administer bankruptcy cases and proceedings (i.e., failed to exercise original bankruptcy jurisdiction).61

Nonetheless, one may reasonably question the underlying rationale of Rule 9031 because it summarily restricts the authority of "any judge" to appoint a special master in an appropriate bankruptcy case or proceeding under the Code.62 Perhaps, one may even reasonably question whether this restriction was an intended result. It seems clear that in 1983 the Federal Rules of Bankruptcy Procedure intended to prohibit the appointment of special masters by bankruptcy judges in cases under the Code.63 Did the Federal Rules of Bankruptcy Procedure, however, actually intend to take away the procedural and inherent power to appoint a special master from the United States district court in a case or proceeding under the Code?

Former Bankruptcy Rules 513 and 102(b) allowed district judges to appoint a special master in a bankruptcy case in the event the district judge retained the bankruptcy case or withdrew the reference of the case from the bankruptcy court.64 The fact that the former bankruptcy rules of procedure allowed for district judges to appoint special masters might suggest that the scope of Federal Rule of Bankruptcy Procedure 9031 is far too broad.65 Stated another way, one may reasonably question whether Rule 9031, a procedural rule, really intended to strip the United States district court of its equitable and inherent power of appointing a special master in an appropriate, complex, and rare bankruptcy case or proceeding.

IV. WHY SPECIAL MASTERS SHOULD BE APPOINTED IN APPROPRIATE AND RARE BANKRUPTCY CASES OR PROCEEDINGS

In an appropriate and rare bankruptcy case or proceeding, a special master can greatly contribute to the simplification and advancement of speedier and less costly litigation in numerous capacities.66 As noted earlier, the appointment of special masters (or other technical advisors) should be a last resort, or as one court articulated "hen's-teeth rare."67 This innovative case management tool (i.e., the authority to appoint a special master) possesses utility and can significantly contribute in an appropriate and rare bankruptcy case or proceeding as it does in complex and rare, non-bankruptcy civil matters.

When a bankruptcy or district court is faced with unusually difficult bankruptcy problems or unique issues of such complexity and sophistication beyond questions of law and fact, special masters may serve to actually expedite a case or proceeding more efficiently and competently.68 Special masters can, for example, contribute substantially in the areas of complex accounting and computation, discovery, and settlement.69

A. Special Masters In Matters of Account and Difficult Computation

The role of the special master can be most efficiently utilized in matters of account and difficult computation of damages as fully recognized by Federal Rule of Civil Procedure 53(b).70 Likewise, the use of special masters should be utilized in highly complex and extraordinary bankruptcy cases and proceedings for computing and analyzing claims.71 Interestingly, one commentator suggested that a special master, rather than the bankruptcy court, was the most effective method to estimate contingent and unliquidated claims.72 In suggesting the appointment of special masters by the bankruptcy court, the commentator plainly stated:

A bankruptcy court should consider appointing special masters, despite their expense, when it must estimate the values of a large number of claims in which the debtor has admitted liability. In these situations, special masters may obviate the need for any oral hearing, since valuation of damages often involves more concrete, objective factors than does evaluating liability. Moreover, special masters can save time and expense by traveling to the evidence. Finally, by estimating the value of claims outside the confines of the court, special masters can expedite bankruptcy proceedings for other debtors who need the attention of the bankruptcy judge.73

This suggestion, of course, should not be interpreted as a call for the appointment of a special master in a routine bankruptcy case or proceeding. However, litigants involved in contentious bankruptcy cases or proceedings requiring analysis of multiple, contingent, and unliquidated claims might greatly benefit from a special master appointment.74 Unquestionably, the use of special masters should be utilized in extremely complex and rare bankruptcy cases or proceedings involving, for example, multiple, contingent, or unliquidated claims in highly complicated antitrust, product liability, or securities fraud litigation. A bankruptcy court, like other courts administering and adjudicating statutory provisions, should be allowed to implement "abbreviated procedures"" and use innovative case management tools on a case-by-case and proceeding-by-- proceeding basis to serve the interest of all parties and to accomplish the judicial goal set forth in Federal Rule of Bankruptcy Procedure 1001 "to secure the just, speedy, and inexpensive determination of every case and proceeding."76

Difficult accountings often require a special master to compute damage award or interest amounts in non-bankruptcy civil litigation where competing statistical methods are at issue.77 In appropriate and rare bankruptcy cases and proceedings, litigants and courts would greatly benefit from the appointment of a special master, especially where complex and difficult computations are necessary. For example, issues such as employee compensation in corporate litigation,78 fee disputes requiring complex scientific analysis,79 and business marketing analysis80 can be synthesized and organized by technically trained, skilled professionals alleviating the bankruptcy court's substantial workload. Additionally, special masters additionally may provide expertise when the "court's machinery" is insufficient.81 The utilization of such special masters or technical advisors also may provide an expertise and procedural fluidity not possessed by courts or generalist judges.82 Moreover, litigants and busy federal courts could utilize the unique skills of a special master, who could perform the function of organizing and analyzing the claims and estimates of adversaries who have a stake in a highly complex bankruptcy case or proceeding.

The bankruptcy court is the de facto commercial court of America and manages more people and funds than all the other federal courts combined.83 Of all the bankruptcy courts in the world, it is said that the United States bankruptcy court has become the most sophisticated and progressive, and its influence is being felt worldwide as the needs of the global economy reach out for meaningful, international solutions to financial distress.

Many in the bankruptcy community believe that the bankruptcy and district courts, as courts of equity and adjudicators of highly complex, commercial bankruptcy litigation, should be entitled to the use of such an equitable case management device to efficiently adjudicate highly complex issues arising out of appropriate and rare bankruptcy cases and proceedings for the financially challenged and their creditors, especially in resource-exhausting areas of litigation such as discovery.84

B. Special Masters' Contribution in the Discovery Phase

Another role special masters serve in complex litigation is in the discovery phase. Special masters can serve effectively in the pretrial stage of litigation by managing pretrial discovery, especially when scientific and technical questions are threshold issues.85 Special masters can efficiently handle highly contentious and complex discovery disputes when the amount in controversy is substantial and multiple parties exist.86

Furthermore, litigants and courts can justify the expense of the special master when the financial stakes are especially high and the amount of judicial involvement required would impose an undue burden on the court.87 For example, in the "Ohio Asbestos Litigation,"88 two special masters collected data, managed experts, and approved computer programs to run simulations necessary for settlement negotiations in a mass tort case which cried out for some sort of an abbreviated procedure.89 Another instance where special masters can contribute to the litigation process is where multiple documents are claimed to be privileged.90In another mass tort lawsuit, a special master devised a method to obtain discovery information without the use of formal depositions and interrogatories.91

Francis E. McGovern served as an innovative special master in the Northern District of Alabama DDT cases.92 The special master introduced a questionnaire that was administered to claimants in order to expedite and elicit relevant factual information from claimants.93 The parties in the litigation accepted the procedure because it minimized disputes, allowed discovery to progress inexpensively, and eliminated some 2,500 groundless claims.94 The procedure evidently yielded higher quality information than standard discovery procedures.95 Procedures like the one implemented in the Alabama DDT cases manifest the inherent value special masters could contribute to complex litigation in extraordinary bankruptcy cases and proceedings.

Likewise, the court and the parties in the In re Dow Corning Corp.96 litigation may now more fully appreciate and recognize the inherent value that a special master could contribute to a mammoth bankruptcy case, especially when one considers the volume of evidence the litigants offered in the form of foreign and domestic experts in an effort to classify claims and determine the effect of foreign law.97 A special master might be gratefully utilized in such difficult cases, if the prohibition in Federal Rule of Bankruptcy Procedure 9031 did not exist. Although the experts in In re Dow Corning Corp. were not expressly classified as special masters, the use of such experts represent a reality prevalent in modern, complex, non-bankruptcy and bankruptcy litigation. A special master, offering specialized analysis for all the parties in interest, would serve as an efficient and valuable case management tool in highly complex bankruptcy cases and proceedings.

The role of a court appointed expert pursuant to Federal Rule of Evidence 706(a) or a party's expert of its own selection pursuant to Federal Rule of Evidence 706(d) in highly complex bankruptcy cases and proceedings offers a substantial contribution completely separate and apart from the contribution a bankruptcy judge, trustee, examiner, or special master offers. The use and designation of a special master in an appropriate and rare bankruptcy case or proceeding would preserve the intended role of the other players in the bankruptcy process. Concomitantly, a special master facilitates complex dispute resolution since special masters would be specifically created and charged with, inter alia, the duty to efficiently manage the litigation process for financially troubled debtors and other parties in interest. Special masters also offer the management skills and flexibility that facilitate and promote settlement of disputes.98

C. Special Masters as Facilitators for Settlement of Complex Cases and Proceedings

Even opponents of special masters concede that the role defined as "settlement facilitator" is the least intrusive and objectionable role in the special master issue.99 Special masters offer litigants a "quasimediator" or "para-judge" while minimizing ex parte contacts with the judge and avoiding bias or prejudgment on key issues.100 Special masters also provide neutral, disinterested, and detached possibilities and recommendations for settlement.11 With an ability to understand the practical needs of the parties, attorneys, and issues, special masters possess the ability to informally interact with both sides and guide adversaries into settlement more efficiently.102

Special masters may provide a greater likelihood for settlement because of an in-depth command of the relevant facts, evidence, and law of a particular case or proceeding.103 Busy judges ordinarily have little time to develop an intricate and thorough understanding in complex, non-bankruptcy litigation because of the generalist nature that judges must maintain. 104 Special masters, on the other hand, can develop an in-depth understanding and detailed knowledge of the lawsuit without causing the concerns that counsel possess when judges consistently monitor such lawsuits.105 Since special masters are not the final arbiters of litigation, lawyers can exude a negotiable disposition without the fear of consistently being "on the record" like one would feel in front of the ultimate arbiter of the case - the judge.106

Special masters have the luxury to incorporate and introduce a wide range of flexible proposals. Without the time or the resources possessed by the private sector, courts and judges sometimes may fail to provide litigants with the highest degree of creativity or innovative procedures and ideas.107 The flexibility inherently possessed by special masters more than justifies their cost while concomitantly making the litigation more manageable.108 When settlements are attained in complex litigation, the costs of special masters are minimal compared to the potential costs litigants face when the trial and appeal process continues for years.109 Despite the potential contribution special masters could make in complex bankruptcy cases and proceedings, the Federal Rules of Bankruptcy Procedure (Rule 9031) and its accompanying Advisory Committee note, unfortunately, prohibit such an appointment by any court in any case or proceeding under the Code.

V. THE VIEW OF THE 1995 UNITED STATES JUDICIAL CONFERENCE ADVISORY COMMITTEE ON BANKRUPTCY RULES REGARDING THE ISSUE OF SPECIAL MASTERS

In 1995, Judge Paul A. Magnuson, Chief Judge of the United States District Court for the District of Minnesota,110 in his capacity as Chairman of the United States Judicial Conference Committee on the Administration of the Bankruptcy System ("Bankruptcy Committee"), offered a suggestion to the Judicial Conference Advisory Committee on Bankruptcy Rules. This suggestion emanated from the Bankruptcy Committee's Long Range Subcommittee which proposed to abrogate Federal Rule of Bankruptcy Procedure 9031 in order to allow for the appointment of a special master by district and bankruptcy judges in an appropriate and rare bankruptcy case or proceeding.

Specifically, Judge Magnuson suggested the adoption of a newly promulgated Federal Rule of Bankruptcy Procedure 7053 (i.e., a modified Rule 53)111 to apply in Part VII adversary proceedings and contested matters governed by Federal Rule of Bankruptcy Procedure 9014. The suggested new procedural rule, if promulgated, would expressly authorize a district and bankruptcy judge to appoint a special master in an appropriate and rare bankruptcy case or proceeding. To the surprise of many, the Advisory Committee on Bankruptcy Rules rejected Judge Magnuson's recommendation and failed to recommend and transmit a proposed modified Rule 53 to the Judicial Conference Standing Committee on Rules of Practice and Procedure for consideration and public comment under the Rules Enabling Act.

In rejecting the suggestion of Judge Magnuson and the Bankruptcy Committee's Long Range Subcommittee, the Advisory Committee on Bankruptcy Rules stated as follows:

The Committee [Advisory Committee on Bankruptcy Rules] rejected the suggestion that there be authorization to appoint a special master in a bankruptcy proceeding. The consensus was that a special master is too reminiscent of the former bankruptcy referee and that adequate alternatives exist in the authority to appoint a trustee and an examiner.112

Based on the historical and statutorily defined roles of the bankruptcy referee, bankruptcy judge, district judge, bankruptcy trustee, chapter 11 examiner, and the realities of modern American bankruptcy laws and practice, many continue to respectfully disagree with the rationale and position of the Advisory Committee on Bankruptcy Rules.

A. The Bankruptcy Referee/Bankruptcy Judge Analogy

The terms "bankruptcy referee" and "referee system" are not only antiquated terms, but also reflect a less than full appreciation of the current role and powers of a bankruptcy judge (and district judge) under the Code as opposed to a bankruptcy referee under the referee system of the former Act of 1898.(113) Under the former 1898 Act, the bankruptcy referee was charged with the dual responsibility of being primarily an administrator.114 Under the Chandler Act of 1938, the bankruptcy referee was given the duties of a judicial officer and performed fewer administrative duties.115 Since the promulgation of the Rules of Bankruptcy Procedure in 1973, judicial officers of the bankruptcy system have been denominated "United States bankruptcy judges.116 Even before bankruptcy judges received this title, their role as full-scale judicial officers and the ultimate adjudicators of America's bankruptcy laws increased in all respects.117

The administrative functions performed by referees in bankruptcy under the former 1898 Act resulted in frequent, yet arguably permissible, ex parte contacts between parties in interest and the bankruptcy judge.118 The appearance of bias and prejudice, however, manifested itself when the referee performed certain functions other than adjudication. As bankruptcy judges and the tribunals where they presided received more statutory and procedural authority and respect, the administrative duties and capabilities of the judges diminished.

With the enactment of the Code in 1978, the former referee system unquestionably disappeared.119 After almost ten years of study, Congress essentially eliminated the bankruptcy judge's dual role as an estate administrator and a judicial officer.120 In complex bankruptcy cases and proceedings under the former Act of 1898, referees often served litigants as both a judicial officer and an estate administrator.121 Extreme inefficiencies and perceived biases resulted when judicial officers served as an administrator and a judge in complex cases and proceedings.

Under the 1978 Code, United States bankruptcy judges no longer perform or supervise purely administrative functions in bankruptcy cases or proceedings (i.e., most case and non-case related administrative functions) due to the fact that bankruptcy judges are now judicial officers of the United States district court by virtue of 28 U.S.C. sec 151 and 152. Instead, such purely administrative functions and supervisory roles statutorily have been transferred to the United States trustee or United States bankruptcy administrator, as discussed more fully, infra.

Entities now seeking protection under the Code, their creditors, and other parties in interest may suffer undue and unnecessary delays and transaction costs at a time when thrift and economy should be paramount. Special masters can alleviate, if not substantially eliminate, these inefficiencies presently arising in some complex bankruptcy cases and proceedings. Litigants and lawyers in such complex cases and proceedings face increased costs and delays when matters such as discovery disputes and evidentiary exchanges are formally litigated before the bankruptcy or district judge. Besides the role of calculating damage figures in complex cases and proceedings, one of the clearest advantages that a special master offers is in the discovery stage of complex bankruptcy litigation.122

Special masters also can save time and resources because masters provide greater flexibility in, for example, contentious areas in the discovery process.123 Furthermore, special masters may provide a more efficient administration of complex cases and proceedings than a judge whose focus is on multiple, complex cases and proceedings.124 Special masters develop a detailed knowledge of cases and proceedings and offer greater accessibility and flexibility for litigants which is required for effective, complex case management.125

Professor Peter Schuck described some of the proven advantages of a special master in his book, Agent Orange on Trial as follows:

For the parties, he [the special master] offered a means to obtain swift decisions on discovery and related issues from someone with detailed knowledge of the case that was unavailable to a busy, generalist judge. Although the parties could always appeal the special master's decisions to the judge, they knew that frequent appeals would arouse resentment and probably be fruitless. . . . The special master could insulate the court from messy, timeconsuming details, distancing it from the lawyers' incessant posturings and wrangling. The master also constituted a new tactical resource with which the court could hope to manipulate the parties toward agreement.126

As the above quoted text illustrates, the services that a bankruptcy or district judge and a special master can provide litigants are clearly distinguishable. Currently, the role a bankruptcy (or district) judge plays in complex bankruptcy litigation is as an adjudicator. Judges sometimes lack the time and resources to efficiently manage highly complex litigation. On the other hand, special masters can contribute substantially to the dispute resolution process due to their ability to focus and specialize on specific cases and proceedings.127

The use of special masters in extraordinary bankruptcy cases and proceedings also would help fulfill the tenet set forth in Federal Rule of Bankruptcy Procedure 1001 which encourages adjudication of bankruptcy cases and proceedings in a "just, speedy, and inexpensive" manner.128 The skill level and in-depth understanding a special master furnishes litigants in complex cases and proceedings provide speedier and less costly case and estate administrations and more efficient settlements. The evolution of the role of the United States bankruptcy judge, compared to the contributions made by a special master in complex litigation, substantiates and differentiates the significant difference between the bankruptcy judge and the special master.

B. The Bankruptcy Trustee Analogy

In an effort to further improve the efficiency of the bankruptcy court, the bankruptcy trustee evolved into an intricate player in the bankruptcy system while the bankruptcy judge performed the role as an adjudicator.129 An assertion that a bankruptcy trustee is equipped to perform the same unique functions as a special master, in reality, is simply misplaced.130 As discussed earlier, the Advisory Committee on Bankruptcy Rules rejected Judge Magnuson's suggestion stating, inter alia, that the bankruptcy trustee could perform the special master's role.131 The bankruptcy trustee, however, has distinctive statutory duties and a clearly demarcated role in the bankruptcy process.132 The bankruptcy trustee serves the estate and litigants in several clearly-defined capacities, but the trustee's role is certainly different than the intended role of a special master.

Unlike the former referee system, a bankruptcy panel trustee is now appointed by the United States trustee or the bankruptcy administrator and not the court.133 Once appointed, the bankruptcy trustee, inter alia, serves in a general role in the management and disposition of the case and estate, not just for a distinct or limited purpose like a special master.134 By virtue of sec 323(a) of the Code, a bankruptcy trustee is the statutory representative of the estate created under sec 541(a) of the Code.135 Additionally, the bankruptcy trustee has certain investigatory and reporting obligations imposed by the Code during the trustee's appointment.136

Simply put, the duties and responsibilities of a bankruptcy trustee under the Code are significantly and uniquely different from those of a special master. For example, the bankruptcy trustee in a Chapter 11 case is required, among other things, to perform all the statutory duties of a trustee specified in secs 704(2), (5), (7), (8), and (9) of the Code.137 Chapter 11 cases and proceedings may become quite complex and require substantial involvement by the trustee, if a trustee is appointed.138 The Chapter 11 trustee, who serves effectively as the debtor's management during the administration of the case, owes a fiduciary duty to the estate created under section 541 (a) of the Code and all parties in interest to maximize the value of the properties of the estate.139

The trustee also has a virtual arsenal of special avoiding powers under secs 544(a), 545, 548, 544(b), 547(b), 553(b), 549, and 724 of the Code in order to foster the equitable concept of equality of distribution among creditors similarly situated.140 The statutory duties performed under the avoiding powers position the trustee in a highly adversarial role in the litigation process. The trustee must investigate potential causes of action against the debtor's officers, creditors, and other third parties which makes the trustee a potential, or in many cases and proceedings, an actual adversary.141

By virtue of Federal Rule of Bankruptcy Procedure 6009, "with or without court approval", the bankruptcy trustee may prosecute or defend any action "by or against the debtor, or commence and prosecute any action or proceeding in behalf of the estate before any tribunal."142 Thus, bankruptcy trustees may become major litigants in cases and proceedings since bankruptcy trustees have statutorily defined and highly distinctive roles. Trustees are in reality and theory incapable of performing neutral, facilitative roles traditionally and typically performed by a special master.

The intended role ofthe special master can be distinguished from the statutorily defined role of the bankruptcy trustee. The investigatory and interested role of the bankruptcy trustee precludes a trustee from providing litigants with expedited discovery techniques or disinterested recommendations for settlement. Moreover, the bankruptcy trustee owes a fiduciary duty to the bankruptcy estate as the statutory representative of the bankruptcy estate created under section 541 (a) of the Code which precludes the trustee from serving as a detached, neutral arbiter when analyzing complex claims in a case or proceeding. Unlike the bankruptcy trustee, no limitations or statutorily prescribed duties bind a special master; therefore, a special master offers litigants a detached specialist to resolve complex, threshold issues in extremely difficult cases and proceedings.

C The Chapter 11 Examiner Analogy

As stated earlier, the Advisory Committee on Bankruptcy Rules rejected Judge Magnuson's suggestion of a modified Rule 53 (i.e., a newly promulgated Federal Rule of Bankruptcy Procedure 7053) in appropriate and rare bankruptcy cases and proceedings, stating that the bankruptcy examiner could perform the unique role suggested for a special master. 113 However, the bankruptcy examiner has distinctive, limited statutory duties set forth under the Code discernable from the intended duties of a special master.144

Section 1104(b) of the Code defines the role of an examiner and specifically provides as follows:

If the court does not order the appointment of a trustee under this section, then at any time before the confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall order the appointment of an examiner to conduct such an investigation of the debtor as is appropriate, including an investigation of any allegations of fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor of or by current or former management of the debtor, if

(1) such appointment is in the interests of creditors, any equity security holders, and other interest of estate; or

(2) the debtor's fixed, liquidated, unsecured debts, other than debts for goods, services, or taxes, or owing to an insider, exceed $5,000,000.(145)

Examiners are appointed only in Chapter 11 cases (not in cases under Chapter 7, 9, 12, or 13) and only on a motion by a party in interest, the United States trustee, bankruptcy administrator, or the court on its own initiative, and before the confirmation of a plan.146 Once appointed, the Chapter 11 examiner may perform investigative functions similar to those performed by the bankruptcy trustee, but differences exist which make their contributions distinctive.147

Examiners have a statutory duty, inter alia, to investigate and report to the court any misconduct or fraud perpetrated by the debtor or others.148 Like the intended role of a special master, an examiner serves in a manner that is by its nature "disinterested and nonadversarial."149 Chapter 11 examiners (and bankruptcy trustees), however, report, investigate, and scrutinize the debtor's financial affairs. Unlike the bankruptcy trustee, however, the examiner does not serve as a statutory representative of the bankruptcy estate created under section 541 (a) of the Code.150 The statutorily defined role of the examiner and trustee, therefore, preclude either one of performing the neutral, facilitative role intended for a special master.

The examiner's active participation in a Chapter 11 case apparently transforms the examiner into a "party in interest" based upon, for example, the examiner's powers in sections 343 and 1106(a)(3)-(4) of the Code.151 It is emphasized that the examiner ordinarily is not a litigator. Actually, section 1109(b) of the Code does not expressly illustrate an examiner as even being a party in interest.152

It is noted that Federal Rule of Civil Procedure 53(a) defines "master" to include "a referee, an auditor, an examiner, and an assessor."153 The role of the examiner originated in part from the need to create an alternative to the special master in corporate reorganizations under Chapter X of the 1898 Act.154 The examiner, however, was not the same as the special master under the former Act. The special master served as an assistant judge or referee, but the examiner served as an investigator.155

The statutory duties of the Chapter 11 examiner under the Code essentially are threefold. Examiners investigate the financial condition of the debtor, the operation of the debtor's business, and the desirability or feasibility of continuing the debtor's business.156 By virtue of sections 1106 and 1107 of the Code, the Chapter 11 debtor in possession does not have to investigate itself.157 An examiner, if one is appointed, is required to make such an investigation and file a statement of the investigation performed.158 The examiner must file and distribute a copy or a summary of the investigation to certain parties in interest as designated by the court.159

Thus, the role of the examiner is clearly distinguishable from that of a special master (or trustee). The intended role of the examiner in Chapter 11 cases is to serve as an investigator rather than a litigator or mediator.160 Additionally, the fact that an examiner probably is a party in interest clearly distinguishes it from a special master.

Arguably, a special master in a Chapter 11 case would not be a party in interest under section 1109(b) of the Code, but the examiner's investigations would curtail any potential for the examiner to serve as a neutral arbitrator for contentious, threshold issues in complex cases and proceedings. If special masters were authorized to be appointed in appropriate and rare cases and proceedings under the Code, their role would be as a passive, neutral arbiter during estate administration and/or specific litigation, not as special investigators.

Like examiners, special masters could provide very valuable case management assistance in extraordinary and rare bankruptcy cases and proceedings and even contribute substantially in such matters under Chapters 7, 9, 12, and 13 of the Code.161 Working concurrently in certain bankruptcy cases and proceedings, the special master and examiner would facilitate adjudication in their respective and welldefined capacities.162 Furthermore, developing case law seems to approve of the practice that has developed in the bankruptcy court for the Southern District of New York of appointing an "examiner" in some highly complex Chapter 11 cases to help coordinate and resolve cross border insolvency disputes.163

VI. THE ISSUE OF SPECIAL MASTERS REVISITED - THE FAILURE OF THE 1996 ADVISORY COMMITTEE ON BANKRUPTCY RULES TO RECOMMEND THE ABROGATION OF FEDERAL RULE OF BANKRUPTCY PROCEDURE 9031

In September 1996, the Advisory Committee on Bankruptcy Rules, at the request of the Judicial Conference of Committee on the Administration of the Bankruptcy System, revisited the issue of special masters. The suggested amendment submitted by the Judicial Conference Bankruptcy Committee to abrogate Federal Rule of Bankruptcy Procedure 9031 and promulgate a modified Rule 53 failed by a vote of eight to five.164 The five bankruptcy judges on the Advisory Committee on Bankruptcy Rules voted for the proposed amendment, but noted its limited application (i.e., it would only apply in a very rare bankruptcy case or proceeding).165 The eight committee members who voted against the suggested amendment cited two important issues of concern. The two issues were the standard of review to be applied to a special master's findings of fact and conclusions of law, if required by the court, and the method and source of compensation to be allowed to the master.166

A. Circumventing Multiple Referrals

By virtue of 28 U.S.C. sec 157(a), each United States district court may refer any or all bankruptcy cases and proceedings under Title 11 to the bankruptcy judges for the district.167 Opponents of the special masters issue intimate that abrogating Federal Rule of Bankruptcy Procedure 9031 and allowing Federal Rule of Civil Procedure 53 to apply in bankruptcy cases and proceedings would amount to an impermissible "referral upon a referral."168 Specifically, if all of the provisions in Rule were adopted, in particular Rule 53(f), bankruptcy judges would be expressly authorized to refer extraordinary bankruptcy cases and proceedings to magistrate judges. The proposed modified Rule 53, as suggested here, however, avoids the multiple referral problem because the modified rule simply would not adopt or incorporate Rule 53(f) regarding magistrate judges. Thus, bankruptcy judges would not wield the authority to appoint or refer cases or proceedings under Title 11 to magistrate judges because Rule 53(f) would be excluded in the modified Rule 53.

B. Clearly Erroneous Standard of Review

Another concern regarding the special master issue was the standard of review to be applied to a special master's report, if required by the court (i.e., the master's proposed findings of fact and conclusions of law, if required by the court). The "clearly erroneous" standard contained in Federal Rule of Civil Procedure 53(e)(2) would not apply in the suggested modified Rule 53. Instead, the proposed findings and conclusions of the special master, if required, would be reviewed de novo by the district court utilizing language similar to 28 U.S.C. sec 157(c)(1).(169)

Accordingly, the utilization of a special master in only rare and highly complex bankruptcy cases and proceedings affords litigants the appropriate appellate standard of review and accords constitutionally. Concomitantly, the use of special masters in extraordinary Title 11 cases and proceedings will curtail costly delays and scheduling conflicts incurred during protracted litigation.170 Additionally, increased appeals will not result as long as special masters are used only in exceptional circumstances and serve the intended purpose as a valuable, complex case management tool.

C. Compensation of the Special Master

The source and amount of compensation to be paid to special masters under Title 11 cases and proceedings must be analyzed and substantiated, especially when one considers the financial limitations facing many debtors and their creditors. Volumes of material exist regarding the fees, justification, and utility of special masters.171 While the subjectivity of the scholarly debate is appreciated and highly respected, the utilization of special masters in extraordinary bankruptcy cases and proceedings provides litigants, the public, and the court with an efficient and less costly method of dispute resolution.172 Special masters minimize transaction costs for litigants by implementing informal procedures ultimately procuring, for example, enlightened settlements.173 In order to avoid potential inefficiencies and excessive costs, courts must explicitly define the master's scope, duties, and responsibilities.174 Compensable activities and services, as well as the source of payment, must be defined by the district or bankruptcy court in a formal appointment order.175

It is respectfully asserted that the statutory authority for compensation of special masters currently exists under the Code.176 The proposed "modified Rule 53" and the existing statutory sections of the Code regarding compensation preclude the need for legislative amendments to the Code. The mechanics of the proposed "modified Rule 53" can be applied in a bankruptcy case or proceeding.

1. Compensation of Special Masters in Bankruptcy Cases

In bankruptcy cases, sec 327 of the Code authorizes the trustee or the debtor in possession to employ "professional persons" with the approval of the court.177 The term "professional person" is broadly illustrated and includes individuals involved in the administration of the sec 541 (a) estate equipped with some special knowledge or skill achieved through years of experience and/or educational achievement.178 A special master fits within the definition of a "professional person" under sec 327(a) of the Code.179 A special master would play an important role in the administration of the bankruptcy case and estate. Once the court approves the employment of the special master under sec 327 of the Code and Federal Rule of Bankruptcy Procedure 2014, the special master's costs and fees ultimately would be approved by the court under sec 330(a)(1) of the Code, after notice to the parties in interest and a hearing.180

Absent an application by the trustee or debtor-in-possession seeking to employ a special master in a case under Title 11, the court may appoint a special master sua sponte. By analogy, the court's inherent authority to appoint an examiner or a trustee sua sponte is firmly entrenched in bankruptcy case law under secs 1104 and 105(a) of the Code.s181 Similarly, special masters, like other professionals, may be appointed, sua sponte, by the court pursuant to Federal Rule of Evidence 706(a), the inherent authority of the court, and under sec 105(a) of the Code.182 In any event, examiners, trustees and "other professional persons" (e.g., special masters), would file applications for compensation and reimbursement of expenses under secs 330 and 331 of the Code.183

Unless otherwise ordered by the court, the fees earned by a special master under a Title 11 case would be paid out of the funds of the bankruptcy estate as an administrative expense.184 The statutory authority and priority of special master's compensation in a bankruptcy case are addressed in the Code as a first priority, administrative expense.185 This specific statutory authority and source already exists if one considers the effect and significance of the word "including" found in sec 503(b) of the Code.186

The reach and extent of the word "including," as it is used in Title 11 cases (and proceedings), is defined and clarified in sec 102(3) of the Code and states, in relevant part, that the word "including" is not limiting.187 The significance of the statutory definition means that the listed administrative expenses found under sec 503(b) are not exhaustive. Thus, the statutory authority addressing the costs and fees of a special master, who facilitates the efficient administration of a complex bankruptcy case and makes a "substantial contribution," exists under the current provisions of the Code. Finally, secs 330(a)(1)-(2) of the Code provide statutory safeguards against excessive professional fees and expenses because the court ultimately approves the amount of professional compensation, only after notice and a hearing and subject to the traditional appellate process.188

2. Compensation of Special Masters in Bankruptcy Proceedings

While the existing provisions of the Code (e.g., section 330) provide statutory authority for compensation of special masters in bankruptcy cases, Federal Rule of Civil Procedure 53(a) currently governs the appointment and compensation of a special master in an extraordinary nonbankruptcy case. The modified Rule 53, as suggested here, would substantially incorporate some, but not all, of the existing language in Federal Rule of Civil Procedure 53(a). Since Rule 53(a) utilizes the word "action," the definition of"action" found in Federal Rule of Bankruptcy Procedure 9002(1) must be applied.189

It is noted that Rule 9002(1) defines "[a]ction" or "civil action" as an adversary proceeding.190 Therefore, the modified Federal Rule of Civil Procedure 53 and Rule 9002(1) would provide the authority for the appointment of special masters in bankruptcy cases and proceedings. Moreover, Federal Rule of Civil Procedure 53(a), as incorporated in the modified Rule 53, would provide for the compensation of special masters in extraordinary bankruptcy cases and proceedings and the expenses would be assessed by the court.191

Currently, however, Federal Rule of Bankruptcy Procedure 9031 and its accompanying Advisory Committee note impose procedural barriers that restrict the use of this very valuable case management tool in any bankruptcy case or proceeding by either the district or bankruptcy court, regardless of the appropriateness.192 A procedural improvement (i.e., the use of a special master) could be achieved by an amendment to the Federal Rules of Bankruptcy Procedure in accordance with the Rules Enabling Act process.

VIL A CALL FOR THE UNITED STATES JUDICIAL CONFERENCE ADviSORY COMMITTEE ON BANKRUPTCY RULES To RECONSIDER ITS PRIOR POSITION REGARDING FEDERAL RULE OF BANKRUPTCY PROCEDURE 9031

A. Rules Enabling Act and How It Works

28 U.S.C. sec 2075 (i.e., the Rules Enabling Act) statutorily addresses the specific rule-making process in the bankruptcy system.193 Under this section, Congress delegates initial rule making authority to the Supreme Court, which in turn solicits the aid and expertise of the Judicial Conference of the United States and both its standing rules committee of practice and procedure and its rules advisory committee before transmitting amended and/or new rules to Congress for consideration.194 If the rule amendments are not altered by Congress, the amended and/or new rules become effective on December 1 of the year in which they are transmitted to Congress, unless otherwise provided by law.195

Members of the Advisory Committee on Bankruptcy Rules consist of highly distinguished lawyers, judges, and professors who study and submit proposed procedural amendments and improvements to the bankruptcy rules to the Standing Committee. Likewise, highly distinguished individuals serve on the Standing Committee. Pursuant to the provisions of 28 U.S.C. sec 2073(d), the Judicial Conference Committee making recommendations or rule changes must "provide a proposed rule, an explanatory note on the rule.... a written report" including any dissenting views made by other committee members, and a solicitation for public comment.196

This specific call for the Rules Enabling Act to cause the Federal Rules of Bankruptcy Procedure to be amended to allow for the appointment of a special master in appropriate and rare bankruptcy cases and proceedings by United States district and bankruptcy judges serves every interest group or litigant striving for "justice, dispatch, thrift, and economy in litigation."197

B. The Call for a Reconsideration by the Current Members of the Judicial Conference Advisory Committee on Bankruptcy Rules Regarding Federal Rule of Bankruptcy Procedure 9031

Of course, the Rules Enabling Act should cautiously promulgate new procedural rules and amendments to existing rules. The Rules Enabling Act process, inter alia, is charged with the duty and responsibility to improve the efficiency of the federal courts. For the reasons articulated in this article, a procedural rule authorizing the appointment of a special master in highly complex bankruptcy cases and proceedings should be promulgated, but actually utilized only in rare and exceptional bankruptcy cases and proceedings.

The Judicial Conference Advisory Committee on Bankruptcy Rules is respectfully requested to revisit and thereafter reconsider its prior views regarding the appointment of special masters in appropriate and rare bankruptcy cases and proceedings. The bankruptcy system and its users would greatly benefit by the promulgation of a new rule (i.e., a modified Rule 53) authorizing the district and bankruptcy courts to appoint a special master on a case-by-case and proceeding-by-proceeding basis.

VIII. CONCLUSION

The United States bankruptcy courts have become the de facto commercial courts of America. Indeed, highly complex litigation occurs daily in the bankruptcy courts. With all due respect to the Judicial Conference Advisory Committee on Bankruptcy Rules, this valuable and effective case management tool (i.e., the appointment of a special master in appropriate and rare bankruptcy cases and proceedings) should be expressly authorized. The commercial realities of modern American bankruptcy law and practice and related cross-border insolvency disputes cry out for the utilization of a special master in appropriate and rare bankruptcy cases and proceedings.

To deprive the United States district and bankruptcy courts of this valuable case management tool will only continue to force litigants to absorb undue costs and delays in such bankruptcy cases and proceedings. Obviously, courts should not use a special master to abdicate judicial responsibilities. As noted earlier, exceptional circumstances must exist in an appropriate and rare bankruptcy case or proceeding to wan-ant the appointment of a special master.198

Since the role of the special master is clearly distinguishable from the role of the trustee and chapter 11 examiner, the Federal Rules of Bankruptcy Procedure, pursuant to the Rules Enabling Act, should be amended to expressly allow for the appointment of a special master by district and bankruptcy courts in an appropriate and highly complex bankruptcy case or proceeding. By virtue of the 1984 restructuring of the bankruptcy court system, the bankruptcy court is now a statutory unit of the United States district court, and the bankruptcy judges serve as judicial officers of the district court.199 The distinctive and clearly defined role of the adjudicators in the current bankruptcy system hardly resembles the former referee system. It is respectfully stated that the evolution of these roles now compels the current members of the Advisory Committee on Bankruptcy Rules to revisit and reconsider the current status of Rule 9031. The utility of special masters in a limited number of highly complex bankruptcy cases and proceedings certainly exists today and will exist in the future. It is an idea whose time has come.

Due to a procedural rule and an accompanying Advisory Committee note thereto, United States district and bankruptcy judges currently do not wield this valuable and pragmatic case management tool in any bankruptcy case or proceeding, regardless of the circumstances.200 The bankruptcy courts in America handle millions of dollars in complex litigation daily.201 Tribunals, such as the United States bankruptcy and district courts, should be afforded the use of this equitable and uniquely valuable case management tool in an appropriate case or proceeding. These tribunals preside over highly complex and sometimes colossal commercial cases and proceedings involving both domestic and cross border insolvency disputes.202 As stated, neutral third party expertise would aid the disposition of extraordinary bankruptcy cases and proceedings.203

For the reasons mentioned above, the current members of the United States Judicial Conference Advisory Committee on Bankruptcy Rules are respectfully urged to re-examine and reconsider its prior views and position on special masters. This article further encourages the Advisory Committee to thereafter recommend and transmit to the United States Judicial Conference Standing Committee on Rules of Practice and Procedure a proposal to amend the Federal Rules of Bankruptcy Procedure in order to accomplish the needed result (i.e., the promulgation of a modified Rule 53 for the utilization of special masters in exceptional and rare bankruptcy cases and proceedings). At the very least, the Rules Enabling Act process, via the relevant committees of the United States Judicial Conference, should solicit opinions and public comments from the bench and bar regarding this highly important issue.

Finally, the addition of this valuable case management tool will help foster the judicial goal of the bankruptcy system which is "to secure the expeditious and economical administration of every case under the Code and the just, speedy, and inexpensive determination of every proceeding therein."204

1. At the outset, it is important to note that this article does not attempt to argue or even suggest that bankruptcy courts should possess broad discretion to routinely appoint special masters. Rather, this option should be available only in "rare and appropriate" cases and proceedings where extraordinary circumstances exist. See infra Part IV.

2. See infra part VII.

3. James S. DeGraw, Rule 53, Inherent Powers, and Institutional Reform: The Lack of Limits on Special Masters, 66 N.Y.U. L. REV. 800 (1991).

4. Margaret G. Farrell, Coping with Scientific Evidence: The Use of Special Masters, 43 EMORY L.J. 927 (1994).

5. In re Peterson, 253 U.S. 300,312-13 (1920); see also Kimberly v. Arms, 129 U.S. 512, 524-25 (1889) (citations omitted).

6. Margaret G. Farrell, The Function and Legitimacy of Special Masters: Administrative Agencies for the Courts, 2-FALL WIDENER L. SYMP. J. 235, 247 (1997). 7. Jerome I. Braun, Special Masters in Federal Court, 161 F.R.D. 211, 213 (1995); see also In re Peterson, 253 U.S. at 312; Kimberly, 129 U.S. at 524-25.

8. Braun, supra note 7, at 213 (citing former Equity Rule 59); see also Matthews v. Weber, 423 U.S. 261, 274-75 (1976) (discussing the limitations placed upon the appointment of a special master); La Buy v. Howes Leather Co., 352 U.S. 249 (1957).

9. Braun, supra note 7, at 214.

10. Margaret G. Farrell, The Role of Special Masters in Federal Litigation. C842 ALIABA 931, 947-51 (1993).

11. Id. at 937.

12. See, e.g., Farrell, supra note 6, at 264; Farrell, supra note 10, at 935. 13. 253 U.S. 300 (1920).

14. Farrell, supra note 10, at 937 (citing In re Peterson, 253 U.S. at 314). 15. FED. R. Civ. P. 53.

16. Id.

17. Linda J. Silberman, Masters and Magistrates Part I. The English Model, 50N.Y.U. L. REV. 1070 (1975).

18. See, e.g., Nat'l Org. for the Reform of Marijuana Laws v. Mullen, 828 F.2d 536 (9th Cir. 1987); Morgan v. Kerrigan, 530 F.2d 401, 425-27 (1st Cir. 1976); Alberti v. Klevenhagen, 660 F. Supp. 605 (S.D. Tex. 1987); Hart v. Cmty. Sch. Bd., 383 F. Supp. 699 (E.D.N.Y. 1974); Swann v. Charlotte-Mecklenburg Bd. of Educ., 306 F. Supp. 1291, 1313 (W.D.N.C. 1969), vacated on other grounds, 431 F.2d 138 (4th Cir.), on remand, 318 F. Supp. 786 (1970), affd, 402 U.S. 1 (1971).

19. Curtis J. Berger, Away From the Court House and Into the Field: The Odyssey of a Special Master, 78 COLUM. L. REV. 707, 730-31 (1978) (involving the special master's contribution and the mechanics of developing complex remedies in matters where diverse interests are represented in extraordinary cases).

20. La Buy v. Howes Leather Co., 352 U.S. 249, 259 (1957) (finding that the factual conditions failed to merit the "exceptional conditions" requirement under Rule 53(b)). 21. Id.

22. 934 F.2d 1064, 1070 (9th Cir. 1991). 23. 94 F.R.D. 173 (E.D.N.Y. 1982).

24. No. 88 Civ. 7307, 1993 U.S. Dist. LExis 2263, at * I (S.D.N.Y. Feb. 26, 1993). 25. 117 F.R.D. 650 (C.D. Cal. 1987).

26. 147 F.3d 935 (D.C. Cir. 1998).

27. But see Farrell, supra note 6, at 281 (stating that the failure to employ a master to aid the parties' interpretation of the technological complexities "seems inconsistent with the statement in the Notes of the Advisory Committee on Rules relating to the 1983 amendments to Rule 53 ..." which authorizes such appointments when specialized expertise is desired or helpful to the parties); see also John R. Wilke, Microsoft Judge Names Mediator to Seek Accord, WALL ST. J., Nov. 22, 1999, at A3 (ultimately the case received what some might call expert settlement guidance in the form of a mediator with the appointment of the highly skilled Chief Judge of the Seventh Circuit, the Honorable Richard A. Posner).

28. Wayne D. Brazil, Special Masters in Complex Cases: Extending the Judiciary or Reshaping Adjudication?, 53 U. CHi. L. REV. 394, 398 (1986); Patricia M. Wald, "Some Exceptional Condition" - The Anatomy of a Decision Under Federal Rule of Civil Procedure 53(b), 62 ST. JOHN'S L. REV. 405 (1988).

29. FED. R. BANKR. P. 9031. The Advisory Committee note accompanying Rule 9031 states that the rule additionally precludes the appointment of special masters in 11 proceedings" under the Code.

30. See Former Bankr. Rule 513 entitled Special Masters (1979) (stating as follows: "If a reference is made in a bankruptcy case by a judge to a special master, the Federal Rules of Civil Procedure applicable to masters apply").

31. 4 COLLIER ON BANKRUPTCY 513.1 (14th ed. 1978).

32. The term "Referee" served as the proper name for adjudicators of bankruptcy matters prior to 1973. In 1973, the Rules of Bankruptcy Procedure were first promulgated changing the title of"referee" to "United States bankruptcy judge." See Former Bankr. Rule 901(7) (1973).

33. 4 COLLIER ON BANKRUPTCY, supra note 31, 513.1. 34. 28 U.S.C. 151,152 (1994).

35. 4 COLLIER ON BANKRUPTCY, supra note 31, , 513.1.

36. 11 B.R. 294 (Bankr. N.D. Ohio 1981), rev'd. 23 B.R. 276,279 (N.D. Ohio 1982). 37. Citibank, N.A. v. White Motor Corp. (In re White), 23 B.R. at 279 (reversing based upon the fact the bankruptcy court delegated a claim to a special master which the bankruptcy court lacked authority to entertain. However, the court stated: "This is not to suggest that a bankruptcy court has no power to appoint a Special Master. In appropriate circumstances, perhaps it can. However, it cannot appoint a Master to resolve claims which the bankruptcy court itself lacks the authority to entertain.").

38. White Motor Corp. v. Citibank, N.A., 704 F.2d 254, 265 (6th Cir. 1983).

39. See, e.g., id. (stating that in an effort to promote good bankruptcy administration the district court could appoint a magistrate judge as a special master but it should comply with Federal Rule of Civil Procedure 53); Pension Benefit Guar. v. Ouimet Corp., 630 F.2d 4,

8 n. 11 (I st Cir. 1980) (stating the district court appointed the bankruptcy judge hearing the proceedings to serve as a master); Crateo, Inc. v. Intermark, Inc., 536 F.2d 862-68 (9th Cir. 1976) (approving the reference to a special master based on the complexity of the case involving an involuntary bankruptcy petition filed against an allegedly insolvent company which had tangled financial affairs and a duplication of problems after purchasing two additional subsidiary corporations).

40. White, 704 F.2d at 265; Former Bankr. Rule 513. 41. See FED. R. BANKR. P. 9031.

42. Id As noted and discussed infra, the words bankruptcy "cases" and "proceedings" are terms of art and should not be used synonymously or interchangeably. See, e.g., 28 U.S.C. 1334(a) ("cases") and 1334 (b) ("proceedings") (1994).

43. FED. R. BANKR. P. 9031.

44. Advisory Committee's note accompanying FED. R. BANKR. P. 9031 (emphasis added).

45. Leonard L. Gumport, The Bankruptcy Examiner, 20 CAL. BANKR. J. 71, 141 (1992). 46. Id.

47. FED. R. BANKR. P. 9031 and accompanying Advisory Committee note.

48. See FED. R. BANKR. P.1001 (stating that "It)he Bankruptcy Rules and Forms govern procedure in cases under title 11 of the United States Code"); see also 28 U.S.C. 157(a) (1993) (establishing as the district court's authority to refer any or all title 11 cases and proceedings to the bankruptcy judges for the district; 28 U.S.C. 157(d) (1993) (emphasizing the district court's authority to withdraw (either mandatorily or discretionarily) a case or proceeding from the bankruptcy court; however, a special master would still not be authorized due to Federal Rule of Bankruptcy Procedure 9031, the Advisory Committee note accompanying Rule 9031, and Federal Rule of Civil Procedure 81 (a)(1)).

49. FED. R. Civ. P. 81(a)(1) (describing the scope and application of the Federal Rules of Civil Procedure and stating, in relevant part, as follows: "They [these rules] do not apply to proceedings in bankruptcy.... ).

50. Clearly, Congress recognized the distinction between a case and proceeding as manifested by the numerous times the terms are appropriately used under the Code of Judiciary and Judicial Procedure. See, e.g., 28 U.S.C. 1334 (ar(b),157(a),1408, 1409, 1412; 11 U.S.C. 307, and FED. R. BANKR. P.1001; see also Kenan v. Fed. Deposit Ins. Corp. (In re George Rodman, Inc.), 33 B.R. 348, 349 (Bankr. W.D. Okla. 1983).

51. Blevins Elec. Inc. v. First Am. Nat'l Bank (In re Blevins Elec., Inc.) 185 B.R. 250, 253 (Bankr. E.D. Tenn. 1995); 995 Fifth Avenue Assocs., L.P. v. New York State Dept. of Taxation and Fin. (In re 955 Fifth Ave. Assocs., L.P.) 157 BR. 942, 949-50 (Bankr. S.D.N.Y. 1993) (citing 5 COLLIER ON BANKRUPTCY 1109.02 (15th ed. 1993)).

52. See FED. R. BANKR. P. 7003 (incorporating FED. R. Civ. P. 3); 2 COLLIER ON BANKRUPTCY 301.03 (15th ed. 1994).

53. Blevins, 185 B.R. at 254 (emphasizing the language in the Advisory Committee note to former Bankruptcy Rule 101 which stated:

A proceeding initiated by a petition for an adjudication under the Bankruptcy Act is designated a "bankruptcy case" for the purpose of these rules. The term embraces all controversies determinable by the court of bankruptcy and all matters of administration arising during the pendency of the case.... The word "proceeding" as used in these rules generally refers to a litigated matter arising within a case during the course of administration of an estate.

(quoting 2 COLLIER ON BANKRUPTCY 301.03 (15th ed. 1994)) (citing 12 COLLIER ON BANKRUPTCY 110 1. 101.101 (14th ed. 1978)).

54. 5 COLLIER ON BANKRUPTCY 1109.02 (15th ed. 1993).

55. Fuel Oil and Supply Terminating v. Gulf Oil Corp., 762 F.2d 1283, 1286-87 (5th Cir. 1985); see also 28 U.S.C. 1334(a)-(b), 157(a)-(b) and (d), 1408, 1409, 1412; 11 U.S.C. 307 (for additional distinctions between "cases" and "proceedings"); cf 28 U.S.C. 1471 (a)-(b) (repealed).

56. See infra Part VII.

57. FED. R. BANKR. P. 9001(4). 58. Id

59. See 10 COLLIER ON BANKRUPTCY 9031.01 (15th ed. 1997).

60. See J. ADRIANCE BUSH, THE NATIONAL BANKRUPTCY ACT OF 1898 1(20) (1 st ed. 1899); former Bankr. Rule 901.

61. See J. ADRIANCE BUSH, supra note 60, 23a; 11 U.S.C. 46(a).

62. FED. R. BANKR. P. 9031 (disallowing FED. R. Civ. P. 53 to apply in cases under the Code).

63. WILLIAM L. NORTON, JR., ed., NORTON BANKRUPTCY LAW AND PRACTICE xxii-xxiv (2d ed. 1999).

64. See former Bankr. Rule 513; former Bankr. Rule 102(b) (stating the authority for district courts to remove a case from the bankruptcy court).

65. NORTON, supra note 63.

66. Braun, supra note 7, at 214.

67. Reilly v. United States, 863 F.2d 149, 157 (Ist Cir. 1988).

68. Johnathan S. Liebowitz, Special Masters: An Alternative Within The Court System, 48 Disp. RESOL. J. 64 (1993); see, e.g, Reilly, 863 F.2d at 158 (adjudicating a medical malpractice case under the Federal Tort Claims Act, the court validated the appointment of a technical advisor [special master] to compute future earnings estimates over a 70 year time period).

69. FED. R. Civ. P. 53(b). 70. Id.

71. David Kaufman, Procedures for Estimating Contingent or Unliquidated Claims iin Bankruptcy, 35 STAN L. REV. 153 173 (1982).

72. Id. at 174.

73 Id. at 173.

74. Id.

75. Id. (noting in this article that any "abbreviated procedure"-employed and utilized after a district or bankruptcy court clearly determines that the appointment of a special master would be an efficient case management tool - would not be contrary to due process procedural protections just because it significantly deviated from traditional procedures used by bankruptcy courts). Constitutional issues may exist, however, they are beyond the scope of this article.

76. FED. R. BANKR. P.1001.

77. Trout v. Ball, 705 F. Supp. 705, 707 (D.D.C 1989) (involving an employment discrimination lawsuit where the special master appointment was manifestly appropriate in order to properly make adjustments for lost promotions and past wages for the litigants).

78. Id.; see also McLendon v. Cont'l, 749 F. Supp. 582 (D.N.J. 1989), aff'd sub nom. McLendon v. Cont'l Can Co., 908 F.2d 1171 (3d Cir. 1990) (involving a special master calculating damages for firings in violation of ERISA).

79. In re Activision Sec. Litig., 723 F. Supp. 1373, 1379 (N.D. Cal. 1989).

80. Danville Tobacco Assn v. Bryant-Buckner Assoc., Inc., 333 F.2d 202,208-09 (4th Cir. 1964) (allowing the utilization of a tobacco market analyst in an antitrust lawsuit to determine the validity of warehouse time for commodities).

81. Id. at 209. 82. Id.

83. See NAT'L BANKR. REV. COMM'N., BANKRUPTCY:: THENEXTTWENTY YEARS, at 722 & nn.1738 & 1739 (1997).

84. See, e.g., Curtis v. Loether, 415 U.S. 189, 195 (7th Cir. 1974); Bank of Marin v. England Trustee in Bankr., 385 U.S. 99, 103 (9th Cir. 1966); Honorable Marcia S. Krieger, The Bankruptcy Court Is a Court of Equity: What Does That Mean?, 50 S.C. L. REv. 275 (1998).

85. Farrell, supra note 10, at 947.

86. See PAUL R. RICE, MANAGING COMPLEX LITIGATION: A PRACTICAL GUIDE TO THE USE OF SPECIAL MASTERS 305(1983); Linda J. Silberman, Judicial Adjuncts Revisited: The Proliferation ofAd Hoc Procedure, 137 U. PA. L. REV. 2131, 2146 (1989).

87. MANuAL FOR COMPLEX LITIGAToN THIRD 21.52 (1995).

88. Ohio Asbestos Litigation: Case Management Plan and Case Evaluation and Appointment Process Order No. 6 (Dec. 16, 1983).

89. Id.

90. See In re United States Dept. of Defense, 848 F.2d 232,239 (D.C. Cir. 1988); see also Jenkins v. Raymark Indus., Inc., 109 F.R-D. 269, 288-89 (E.D. Tex. 1985).

91. Brazil, supra note 28, at 403. 92. Id.

93. Id.

94. Id. at 404. 95. Id at 403-04.

96. 244 B.R. 634 (Bankr. E.D. Mich. 1999) (involving classification of unsecured nonpriority claims and complex issues of tort recovery in domestic and foreign forums in a case involving Chapter 11 of the Bankruptcy Code).

97. See id.

98. Liebowitz, supra note 68, at 67. 99. Silberman, supra note 86, at 2159.

100. Farrell, supra note 10, at 950-51. 101. Brazil, supra note 28, at 411. 102. Braun, supra note 7, at 222.

103. Brazil, supra note 28, at 411. 104. Id

105. Id. 106. Id. 107. Id.

108. Liebowitz, supra note 68, at 67.

109. Id.; see David I. Levine, Calculating Fees of Special Masters, 37 HASTINGS L.J. 141 (1985) (offering an analysis and study of the fee and compensation techniques of special masters in complex cases).

110. Gregory L. Wilmes, Chief Judge Paul A. Magnuson, 45 FED. LAW. 18 (1998) (noting the experience of Chief Judge Magnuson considering that he has presided over numerous large class actions, multidistrict litigation panel cases, and other complex civil actions as well as serving on and chairing several Judicial Conference committees).

II 11. See infra Part IV.C. (discussing a modified Rule 53). What is meant by the use of the phrase "modified Rule 53" is that any newly promulgated procedural bankruptcy rule authorizing the appointment of a special master by the district and bankruptcy courts would not adopt Federal Rule of Civil Procedure 53 in its entirety. The power and scope of appointment would clearly differ in a bankruptcy case or proceeding. For example, it is not contemplated under such a modified Rule 53 that a magistrate judge would be appointed in a bankruptcy case or proceeding.

112. Advisory Committee on Bankruptcy Rules March 21-22, 1996 Meeting Agenda Materials, Introductory Items, p. 13 (Minutes of Sept. 7-8, 1995).

113. See supra note 32; Former Bankr. Rule 901(7) (1973); H.R. REP. No. 95-595, at 8 (1977) (regarding the semantics and misnomer of bankruptcy officials and the idea that a referee was to be considered more of a judicial officer).

114. Melodie Freeman-Burney, Jurisdiction Under the BankruptcyAmendments of 1984: Summing Up the Factors, 22 TULSA L.J. 167, 171 (1986); see also Chandler Act of 1938, ch. 575, 52 Stat. 840 (1938).

115. Freeman-Burney, supra note 114, at 171.

116. Id.; H.R. REP. No. 95-595, at 7-9 (1977); see also Donald A. Brittenham, Jr., The Pros and Cons Behind the First Circuit's Decision to Establish Bankruptcy Appellate Panels and the Growing Question of Whether the Panels Will Last, 32 NEw ENG. L. REV. 215, 218-19 (1997).

117. Brittenham, supra note 116, at 218-19.

118. Compare FED. R. BANKR. P. 9003(a), entitled "Prohibition of Ex Parte Contacts." 119. See Brittenham, supra note 116, at 218-19.

120. See id. at 218.

121. See Freeman-Barney, supra note 114, at 171. 122. Silberman, supra note 86, at 2145-46.

123. Id.

124. See Kenneth R. Feinberg, Creative Use of,4DR: The Court-Appointed Special Settlement Master, 59 ALB. L. REv. 881, 884-85 (1996).

125. Id. at 887.

126. PETER H. SCHUCK, AGENT ORANGE ON TRIAL: MASS Toxic DISASTERS IN THE COURTS 82-83 (1986) (articulating the reliability and utility that all but one of the special master's decisions were confirmed and even the unconfirmed decision was simply modified).

127. In re "Agent Orange" Prod. Liab. Litig., 94 F.R.D. 173,174 (E.D.N.Y. 1982); Avco Corp. v. Am. Tel. & Tel. Co., 68 F.R.D. 532, 534 (S.D. Ohio 1975); Gautreaux v. Chicago Hous. Auth., 384 F. Supp. 37, 38 (N.D. 111. 1974).

128. FED. R. BANKR. P. 1001.

129. Charles J. Tabb, The History of the Bankruptcy Laws in the United States, 3 Am. BANKR. INST. L. REV. 5, 40 (1995).

130. 1 NORTON BANKRUPTcY LAW AND PRACTICE 2d 23.2 (1994). 131. See supra text accompanying note 111.

132. See 11 U.S.C. 704 (1994) (setting out the duties of a trustee); see also 11 U.S.C. 1106, 1202, and 1302 (1994).

133. 28 U.S.C. 586(a) (1994).

134. 11 U.S.C. 704 (setting out the duties of the trustee); see also 11 U.S.C. 1106, 1202, and 1302.

135. 11 U.S.C. 323 (1994) (setting forth the role and capacity of the trustee).

136. Id. 704 (setting out the duties of the trustee); see also 11 U.S.C. 1106, 1202, and 1302.

137. 11 U.S.C. 1106(a)(1).

138. See, e.g., In re Sharon Steel Corp., 86 B.R. 455 (Bankr. W.D. Pa. 1988); In re Main Line Motors, Inc., 9 B.R. 782 (Bankr. E.D. Pa. 1981); In re L.S. Good & Co., 8 B.R. 312 (Bankr. N.D. W. Va. 1980).

139. Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343,352-56 (1985). 140. In re Lockard, 884 F.2d 1171, 1178 (9th Cir. 1989); In re Jet Fla. Sys., Inc., 841 F.2d 1082, 1083 (11 th Cir. 1988); In re Dow Coming Corp., 237 B.R. 380, 393 (Bankr. E.D. Mich. 1999).

141. 11 U.S.C. 323(b) (1994); see, e.g,Commodity Futures Trading Comm'n, 471 U.S. at 352 (stating that "[t]he powers and duties of a bankruptcy trustee are extensive.").

142.11 U.S.C. 323(b); FED. RBANKR. P.6009. 143. See supra note 112.

144. 11 U.S.C. 1104 (1994).

145. 11 U.S.C. 1104(b). 146. Id. 1104(c).

147. Gumport, supra note 45, at 99-100. 148. 11 U.S.C. 1104.

149. See, eg., In re Interco, Inc., 127 B.R. 633, 638 (Bankr. E.D. Mo. 1991); In re Baldwin-United Corp., 46 B.R. 314, 316 (Bankr. S.D. Ohio 1985).

150. Compare 11 U.S.C. 70 (1994) with 11 U.S.C. 1106(a)(1) (1994). Section 704 of the Code is entitled "Duties of trustee" and provides as follows:

The trustee shall

(1) collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest;

(2) be accountable for all property received;

(3) ensure that the debtor shall perform his intention as specified in section 521(2)(B) of this title;

(4) investigate the financial affairs of the debtor;

(5) if a purpose would be served, examine proofs of claims and object to the allowance of any claim that is improper;

(6) if advisable, oppose the discharge of the debtor;

(7) unless the court orders otherwise, furnish such information concerning the estate and the estate's administration as is requested by a party in interest; (8) if the business of the debtor is authorized to be operated, file with the court, with the United States trustee, and with any governmental unit charged with responsibility for collection or determination of any tax arising out of such operation, periodic reports and summaries of the operation of such business, including a statement of receipts and disbursements, and such other information as the United States trustee or the court requires; and

(9) make a final report and file a final account of the administration of the estate with the court and with the United States trustee.

Section 106(a)(1) of the Code is entitled "Duties of trustee and examiner" and provides as follows:

(a) A trustee shall

(1) perform the duties of a trustee specified in sections 704(2), 704(5), 704(7), 704(8), and 704(9), of this title;

151. 11 U.S.C. 343 (1994), 1106(a)(3) and (4)(A)-(B).

152. Id. 1109(b) (1994). But see 2 COLLIER ON BANKRUPTCY 343.02 (15th ed. 1997) (stating that it "would seem obvious" that parties entitled to conduct examination under 343 would each be parties in interest for the purpose of conducting an examination under Federal Rule of Bankruptcy Procedure 2004).

153. FED. R. Civ. P. 53(a) (emphasis added). 154. Gumport, supra note 45, at 141.

155. See Chandler Act of 1938 117, 167-68; 52 Stat. 885, 890, repealed by Bankruptcy Reform Act of 1978; 11 U.S.C. 517, 567-68 (West 1970) (repealed).

156. 11 U.S.C. 1106(a)(3). 157. Id. 1106, 1107.

158. Id. 1106(a)(4XA). 159. Id. 1106(a)(4)(B).

160. Gumport, supra note 45, at 79, 141 n.49 and 425; see also In re Utils. Power & Light Corp., 90 F.2d 798, 800 (7th Cir. 1937) (appointing an "investigator" based upon inherent power and judicial necessity, the district judge expressly declined to utilize a special master).

161. Gumport, supra note 45 at 141.

162. See Bankr. Ct. Dec., Weekly News & Comment, Vol. 35, Issue 2, p. 28 (Nov. 16, 1999).

163. Id. (citing the practices and case management tools employed in In re Maxwell Communication Corp., 170 B.R. 800 (Bankr. S.D.N.Y. 1994) which seem to smear the statutorily defined role of an examiner by assigning the examiner duties that strongly resemble the suggested role of a special master despite the limitation of the examiner's role as defined under I 106(b)); see also In re Leslie Fay Co., 207 B.R. 764, 769 (Bankr. S.D.N.Y. 1997).

164. The Advisory Committee on Bankruptcy Rules, Minutes from the September 26-27, 1996 meeting.

165. Id. 166. Id.

167. 28 U.S.C. 157(a) (1994).

168. See Bankruptcy Judges Advisory Group, minutes from the September 22-23, 1999 meeting.

169. See 28 U.S.C. 157(cX)) (1994); FED. R. BANKR. P. 9033(d). 170. Liebowitz, supra note 68, at 67.

171. Levine, supra note 109, at 141. 172. Farrell, supra note 6, at 274-75.

173. Id. at 275; see also In re A.H. Robins Co., 880 F.2d 709, 725 (4th Cir. 1989); Burroughs v. N. Telecom., Inc. (In re Repetitive Stress Injury Cases), 142 F.R.D. 584, 585-87 (E.D.N.Y. 1992) (suggesting that special masters, as well as other procedural devices, curtail transaction costs and control protracted litigation).

174. Levine, supra note 109, at 199-200.

175. Id. at 200 (providing an in-depth analysis of how special masters are compensated). 176. 11 U.S.C.327 (1994), 503(b) (1994).

177. Id. 327(a).

178. 3 COLLIER ON BANKRUPTcy 327.02[51[al (15th ed. 1997). But see In re Seatrain Lines, Inc., 13 B.R. 980, 981 (S.D.N.Y. 1981) (recognizing two maritime engineers as consultants rather than "professional persons" under 11 U.S.C. 327(a)).

179. 11 U.S.C. 327(a).

180. Id. 330 (a)(1) (1994).

181. See, e.g., In re Bibo, Inc., 76 F.3d 256,258 (9th Cir. 1996); In re Mother Hubbard, Inc., 152 B.R. 189, 197 (Bankr. W.D. Mich. 1993); In re Public Serv. Co. of N.H., 99 B.R. 177, 182 (Bankr. N.H. 1989); In re UNR Indust., Inc., 72 B.R. 789, 794-95 (Bankr. N.D. Ill. 1987); In re Landscaping Servs., Inc. 39 B.R. 588, 590-91 (Bankr. E.D.N.C. 1984).

182. See, e.g., In re Maruko, Inc., 160 B.R. 633 (Bankr. S.D. Cal. 1993) (utilizing Federal Rule of Evidence 706(a) and 11 U.S.C. 105(a), the court, sua sponte, appointed a "Fee Examiner" to provide invaluable assistance reconciling, reviewing, and summarizing multiple fee applications in a mega-bankruptcy case).

183. 11 U.S.C. 330, 331 (1994); FED. R. BANKR. P. 2016. 184. 11 U.S.C. 503 (1994).

185. 11 U.S.C. 503(b); see also I I U.S.C. 507(a)(1) (1994),1129 (a)(9)(A)(1994). 186. 11 U.S.C. 503 (b)(2).

187. See 11 U.S.C. 102(3) (1994).

188. 28 U.S.C. 157(b)(l)-(b)(2)(a) (1994); In re Drexel Burnham Lambert Group, Inc., 133 B.R. 13, 15 (Bankr. S.D.N.Y. 1991) (stating that review of professional fees is mandated under 330).

189. FED. R. BANKR. P. 9002 ("The following words and phrases used in the Federal Rules of Civil Procedure made applicable to cases under the Code by these rules have the meanings indicated unless they are inconsistent with the context ..... ).

190. FED. R. BANKR. P. 9002(l). 191. FED. R. Civ. P.53(a).

192. FED. R. BANKR. P. 9031. 193. 28 U.S.C. 2075 (1994). 194. Id.

195. Id. 2074(a) (1994).

196. Id. 2073(d) (1994).

197. Paul D. Carrington, Making Rules to Dispose of Manifestly Unfounded Assertions: An Exorcism of the Bogy of Non-Trans-Substantive Rules of Civil Procedure, 137 U. PA. L. REV. 2067, 2077 (1989); cf James E. Bailey, III, Legislating Procedure in the Bankruptcy System: A Level Playing Field or Slippery Slope?, 24 MEM. ST. U. L. REv. 717, 719 (1994) (discussing FED. R. BANKR. P. 7004(h) enacted as a result of special interest procedural legislation).

198. It is noted that H.R. 1752, cited as the "Federal Courts Improvement Act of 2000," introduced in the House of Representatives on May 22, 2000, is silent on the matter of special masters; however, it is observed that on January 19, 1999, S. 248, cited as the "Judicial Improvement Act of 1999," was introduced in the Senate in the I st Session of the 106th Congress to modify the procedures of the federal courts in certain matters. Relevant here is section 3(b) of the pending S. 248, entitled Special Masters, addressing proposed legislation applicable in any civil action in a federal court utilizing special masters. Specifically, section 3(b) of S.248 provides, in relevant part, as follows:

(b) SPECIAL MASTERS.(1) IN GENERAL.

(A) APPOINTMENT.- In any civil action in a Federal court, the Federal court may appoint a special master who shall be disinterested and objective.

(B) REMEDIAL PHASE, The court shall appoint a special master under this subsection only during the remedial phase of the action and only upon a finding that the remedial phase will be sufficiently complex to warrant the appointment

(2) APPOINTMENT.

(A) SUBMISSION OF LIST.- If the court determines that appointment of a special master is necessary, the court shall request that the defendant (or group of defendants) and the plaintiff (or group of plaintiffs) each submit a list of not more than 5 persons to serve as a

special master.

(B) REMOVAL.- Each party shall have the opportunity to remove up to 3 persons from the opposing party's list.

(C) SELECTION.- The court shall select the special master from the remaining names on the lists after the operation of subparagraph (B). (3) COMPENSATION.- The compensation to be paid to a special master shall be based on an hourly rate not greater than the hourly rate established under Section 3006A of Title 18, United States Code, for payment of court-appointed counsel, and costs reasonably incurred by the special master. Such compensation and costs shall be paid with funds appropriated to the Judiciary.

(4) REGULAR REVIEW OF APPOINTMENT.- The court shall review the appointment of the special master every 6 months to determine whether the services of the special master continued [sic] to be justified under the standards of paragraph (1).

(5) LIMITATIONS ON POWERS AND DUTIES.- A special master appointed under this subsection

(A) shall not make any finding or communication ex parte; and

(B) may be removed by the judge at any time, but shall be relieved of the appointment upon termination of relief.

199. See 28 U.S.C. 151, 152 (1994).

200. FED. R. BANKR. P. 9031.

201. See NAT'L BANKR. REV. COMM'N., BANKRUPTCY: THE NExT TwENTY YEARS, at 722, nn. 1738-39 (1997).

202. Id.

203. Gumport, ura note 45, at 141.

204. FED. R. BANKR. P. 1001 and the accompanying Advisory Committee note thereto (derived from former Bankr. Rule 903 which emphasizes the Code's objective); see also Katchen v. Landy, 382 U.S. 323, 328 (1966) ("chief purpose of the bankruptcy laws is to secure a prompt and effectual administration and settlement of the estate of all bankrupts within a limited period").

R. SPENCER CLIFT, III*

* R. Spencer Clift, III, Esquire, is a Law Clerk to the Honorable David S. Kennedy, Chief Judge, United States Bankruptcy Court for the Western District of Tennessee; University of Tennessee, Knoxville (B.S., 1996); Cumberland School of Law of Samford University (J.D., 1999). He is licensed to practice law in Tennessee and Alabama.

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